23 September 2004
Social housing is becoming a riskier proposition for investors, according to a leading credit rating agency.
Standard & Poor's, which rates housing associations that raise money through the bonds market, says risk has increased as landlords build homes for a wider range of tenants and because of expected changes to housing benefit.
A report to be published by the agency next month will conclude that most registered social landlords are in a healthy financial condition with strong surpluses following a period of low interest rates.
But business risks are increasing as RSLs diversify into areas such as student housing and properties for sale. There is also concern that rent arrears will rise if benefit is paid directly to tenants.
Although associations are not obliged to seek credit ratings, three request ratings from S&P as a guide. None is rated lower than A-minus.
Robert Robinson, a director at S&P, said investors were aware that most Housing Corporation grants are paid to a small number of RSLs.
'The pressure is on them to lever up their balance sheets and meet the robust agenda the government is pushing in terms of development targets,' he added.